Words on Wealth That Gives Back

In this episode of Words on Wealth, host Lucy Meagher speaks with Dr. Philip Lowe, former Governor of the Reserve Bank of Australia and current Chairman of Future Generation Australia, and Caroline Gurney, CEO of Future Generation. They discuss the intersection of investing and philanthropy, the role of financial markets in supporting social impact, and how strategic giving can drive meaningful change. Tune in for valuable insights on making an impact without compromising returns.

This episode is also available on Apple Podcast. 

Introduction

Welcome to Words on Wealth, a podcast by Evans and Partners that unpacks the key trends and opportunities shaping markets, the economy and your financial well-being. Join us as we make sense of the issues that matter most to you.

Lucy Meagher

Welcome back to the Words on Wealth podcast. I’m Lucy Meagher, Director and Senior Investment Advisor at Evans & Partners. Today, we have a truly insightful conversation in store for you with two distinguished guests. Joining me is Dr. Philip Lowe, who’s the former Governor of the Reserve Bank of Australia and now Chairman of Future Generation Australia. We’re also very fortunate to be joined by Caroline Gurney, who is the CEO of Future Generation. So today we’re diving into the topic of philanthropy and investing and specifically an investment model that’s both unique and inspiring. Future Generation is an initiative that gives investors access to Australia’s top fund managers while also supporting not-for-profit organisations. I think this intersection of philanthropy and investing can be a very important one and our role as advisors is to help our clients really navigate this space, finding opportunities that not only deliver strong financial returns, but also create real social impact. In this episode, we’ll explore the impact future generation has had over the past decade, the motivation behind Philip’s involvement following his career at the RBA, as well as the incredible work being done to support at-risk children and youth. We’ll also discuss how future generation supports its investors so they can achieve strong financial returns, while making a meaningful social difference, which we know is so important. So, without saying too much more, let’s get started.

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We are here today to talk about Future Generation, which is a very unique and inspiring investment vehicle. So I think Caroline, we should start a bit about what is Future Generation.

Caroline Gurney

thank you very much, Lucy. I mean, as you said, Future Generation is incredibly unique. It was very much the brainchild of Jeff Wilson, founder of Wilson Asset Management. He went to London and he saw how a fund manager was raising a lot of money to do some really serious good in the community for cancer. So he thought, right, the financial industry in Australia, you know, we’ll all come together. So he went to some of the best fund managers in Australia. So David Paradise, know, Phil from Regal, and number of others, Peter Cooper, et cetera, you the legends. And they said, would you work pro bono? So no management fees and no performance fees. And so we can give 1 % of the money that we manage in totality to not-for-profits. That was pretty revolutionary. for me, and I think for Phil as well, it’s one of the greatest gifts that the financial markets have come together to actually do. Because it’s not just shareholders getting access to the best fund managers. It’s a very curated portfolio of investments that they invest in. And we can give that 1% to not-for-profits in Australia. We have three now, Future Generation Australia, which is the one that Phil is chair of, which is about Australian equities and then we have a global which is global equities and we have another one which is future generation women which is a mix of two with female fund managers. it is quite amazing and shareholders really appreciate it because they get access to fund managers they wouldn’t normally be able to get access to and they have this sort of very carefully curated portfolio because we have two pro bono investment committees, and they actually work out what the allocation is going to be. So we think that it actually answers a need in Australia to make sure you get investment returns, great yield, obviously capital growth, but also the fact that you’re giving back to the community really at very, very little cost. So it’s a fantastic thing.

Lucy Meagher

Yeah, I think the fact that that aggregation of top class fund managers in the one vehicle plus the philanthropic element is really interesting. So Phil, if I come to you now, I’m sure you fielded many requests and invitations for board appointments and to support different organisations. So what was it about Future Generation Australia that you wanted to support or that drew you there?

Philip Lowe

Thanks, Lucy. It’s great to be with you. When I finished at the RBA, I promised myself that I wouldn’t take any offers for a year. It had been a pretty tough time and the media kept referring to me as the most unpopular person in Australia. I wanted to give myself a bit of a break and I thought a year to decompress. But I broke the promise to myself with Carolyn and when Carolyn and Mike Baird, the previous chair of Future Generation, called me up and asked whether I’d join the board and become the chair. And I broke the promise to myself for two reasons. First is that I’d had some visibility of Future Generation Australia and the fantastic work that it had done. As you know, it gives 1% of its assets each year to kids charities, the kids at risk. So that was appealing to me. But the other thing that really stood out to me was the good returns that off investors. So not only are we giving 1% of the assets to kids charities each year, in the 10 years that future generation’s been in existence, it’s yielded investors a return greater than the ASX200. So 1 % extra than the ASX200 and less variance. So in finance we like high return, less variance, and that’s what future generation has offered. And so we’re helping kids in need and we’re offering good returns at lower risk to mum and dad investors. So that was why I broke that promise to myself.

Lucy Meagher

I think that’s one of the key, I guess, tussles that clients often have is if in being more philanthropic are we somehow forgoing financial return. And I think what you’ve just said has certainly proven that that doesn’t have to be the –

Philip Lowe

The results speak for themselves here. This fund’s been in operation for 10 years and 1 % more than the ASX200. So you haven’t had to give up many return and the fund has had a steady stream of increasing dividends. So that’s attractive to many investors as well. So you haven’t had to give up anything, more return, less risk, and you help kids. Why not invest?

Lucy Meagher

Win-win. So you mentioned, yes, obviously the, you know, impact from future generation is to children and youth at risk. Perhaps you’d each like to give an example of, you know, one of the charities that you’ve chosen to partner with and the social impact.

Caroline Gurney

That is so hard to do. I mean, we have, so for example, we have 24 not-for-profits we’re supporting at the moment. And I think, you know, this model for me is really tried and tested. We’ve given, you know, more than 80 million, so sort of 85 million, to not-for-profits in 10 years since inception. And I have met so many amazing not-for-profits, and we’re now measuring their impact. So for instance, I can say 40 not-for-profits we support in youth mental health and prevention, we’ve reached 5.3 million young people. And I think shareholders really want to see that the money that they’re getting back, they want to see the dividends, they want to see all of those things, but they also want to see where that impact is having. But obviously Phil and I recently went to Giant Steps, which is a not-for-profit that looks after autistic young people. And their facilities and what they do and the caring is absolutely incredible. mean, Phil can add to it, but maybe if I kick off. So I think everybody has the right to a community. And I think that everybody wants to give their kids an education. And many, many young people don’t get that. So Giant Steps actually provides a community, not only for the young people, but also for the parents. Because often if you have a child with difficulties, it’s very difficult to go to the beach unless there’s nobody there. Or it’s very difficult to go to a supermarket. So Giant Steps provides this amazing space with amazing teachers and also therapists to get the best out of those young people. And that’s something I think I’m really proud to support and I know our shareholders are because we all want hope in our lives and I think by funding this one organisation along with others, it’s just incredibly important. Phil, do you want to add to that or what are the other not-for-profits we’re seeing?

Philip Lowe

The thing that I’ve noticed as I’ve read the literature here, the thing that I’ve noticed is that if a kid has an adverse event early on in their life, it leaves a shadow over them for the rest of their life. That’s fundamentally unfair, isn’t it? Something happens to you before maybe you’re 10 or in your first 15 years of your life that you have no control over. might be homelessness or domestic violence or extreme bullying or kind of a bout of kind of a terrible sickness. Those things often leave shadow that affect the rest of your life till you’re 80. It’s unfair. So, the charities that we’re supporting are helping kids who are at risk of these adverse events or experience one of these adverse events because what we’re trying to do with the help of our investors is to lessen the shadows, lighten the shadows that might follow these kids around, which is terribly unfair. And so, I feel really strongly that we should be helping those charities that are kind of helping these kids move away from the adverse event that affected them in their life or reduce the probability of an adverse event occurring and Giant Steps is a great example and there are other fantastic ones on our website. The inherent unfairness of it is the thing that strikes me and what Future Generation is offering is people who have the good fortune of having some money, they can get a good return on their investment and they can help these kids move out of the shadow that could follow them around for rest of their life, terribly unfair.

Caroline Gurney

Phil actually has just launched the Expressions of Interest for Future Generation Australia in terms of the area that he described, that’s a child at risk. We had 330 applications which just came in of this sector in terms of the not-for-profits that helping young people in this area, which I think is incredibly sad. But I know that with, you know, the team is going through them now. We can only pick like 10 to 14. And there’s such a need out there. And I think it’s one of the most incredible things that, you know, the financial community and shareholders are doing, but by giving to these organisations.

Lucy Meagher

So what does that process look like, sort of whittling down from, you know, 300 down to 14? I mean, that must be incredibly difficult.

Caroline Gurney

It’s incredibly difficult. mean, one of them we went through the other day. it makes you cry, what’s actually happening on the streets of Melbourne. So what we’re looking for in terms of our not-for-profits, we want them across the whole of Australia. We want them to have low government funding. We want them to be sort of small, below funding of sort 10 million, really. And we want to be able to group a group of not-for-profits together that can leverage off each other and we can also really create impact. But it’s a very long process. We’re incredibly careful in terms of our due diligence of reviewing every single application to make sure that it’s a thorough process and we’ll announce those results in a couple of months. But it’s very hard and it’s quite heart-wrenching really just to sort of understand what’s going out in the community. The government does so much but it can’t do everything. So I think it’s really incumbent on everybody in Australia to make sure that we help others in need. we live and work in this community and we should give back as much as we can as long as we also have standard of living for ourselves. It’s important.

Lucy Meagher

Yeah, mean, Phil, you spoke about that shadow and just bad luck and unfairness causing detrimental outcomes for youth. Obviously philanthropy has a large role in helping to bridge that gap. For some of our clients who might be looking to provide more structure around their philanthropy, I know a lot of clients might give annually to one organization that’s close to their heart or another, but do you have any advice for those that are looking to add a bit more structure to their philanthropy or their giving?

Philip Lowe

I’m not an expert on how to structure it, but what I know is Australians are generous by nature. But we’re not giving as much as some other countries. I think organizations like Evans & Partners have a role in having conversations with your clients about how to structure their portfolios and give some of the money at some point in their lives away. And investing in future generations is a way of doing that without sacrificing returns. But we need to develop a stronger culture of financial giving and organisations like yours can help have those conversations with the best way of doing that with people because for everyone it’s going to be different, the circumstances are different but we’re generous by nature so let’s help those out, particularly those kids who need it. Yeah I think it’s you know it’s a very very valuable conversation and it’s one as you say that we need to be having more and we’re certainly getting interest from our clients so thank you both very much for your time today. It was wonderful to speak with you.

Caroline Gurney

Thank you very much.

Philip Lowe

Thank you.

Disclaimer

This podcast was prepared by Evans and Partners Proprietary Limited AFSL number 318075. Any advice is general advice only and was prepared without taking into account your objectives, financial situation or needs. Before acting on any advice you should consider whether the advice is appropriate to you. Seeking professional personal advice is always highly recommended. Where this presentation refers to a particular financial product you should obtain a copy of the relevant PDS, TMD, or offer document before making any investment decisions. Past investment performance is not a reliable indicator of future investment performance. Directors, employees and officers at Evans & Partners and its related entities may have holdings in securities listed. Any taxation information is general and should only be used as a guide.